Dell Channels – All the right moves?

As some IT companies continue to consolidate and others split up, Dell is promising its channel partners consistency, stability and increased profitability. And it is showing:

Dell Channel revenue now represents more than 40 percent of overall Dell commercial revenue and its channel business is growing faster than the overall market

Channel revenue growth is up double digits in 10 of Dell’s top 11 countries year-over-year

Dell solutions are now available through three of top Distributors - Ingram, TechData and Synnex - and where Dell is experiencing growth in excess of 50 percent

To keep the channel momentum intact, Dell is pledging US$125 million in enhanced incentives to help channel partners bid and close new customer acquisitions and also deploy towards retention deals with existing customers.

As always, not willing to take any hype on face value Techaisle took to the streets to really talk with Dell SMB channel partners and especially those who have partnered with both Dell and HP. Over the course of last three weeks, Techaisle conducted over 25 depth interviews with SMB channel partners. The discussions clearly revealed that the partners have started to look at Dell rather seriously. As one of them said, “Dell has changed its approach and outlook towards channel partners after it went private. They monitor and coordinate with their partners just like any other OEM. They have changed their ways in how they strategize and have created their training plans to cater to our needs and are succeeding by actively collaborating.”

Another partner, based in Texas and focused on SMBs was more direct, “Dell hasn’t been looking at channel partners as a key to gain market share unlike OEMs like HP. A few months back only about a 30 percent of sales were driven by the channel partners and the rest was a result of Dell’s direct sales efforts. The reason is that Dell itself had a large sales team managing sales accounts. However, after Dell went private they have mended their ways in how they look at us. They have kept the key sales accounts with themselves and the rest have been distributed amongst the channel partners for further management and revenue generation which is a good step as it inculcates trust and sense of real partnership.”

Dell has 167,000 channel partners out of which 4,255 are Preferred and Premium partners.

Nearly 700 channel partners chose to become premier or preferred partners of Dell in 2014, a testament to channel commitment

Training uptake, (a top requirement of channel partners as per Techaisle SMB Channel study), was up by 54 percent in 1H’14. But more importantly, training on software solutions increased by 102 percent.

Rebates processed was also up by 23 percent during the same time frame

4400 new customers were acquired through channels, transacted 10,000 new orders out of which 1200 were for storage and 1600 for software

Although she deftly skipped my question on how many named accounts have been formally handed over to channel partners she reiterated that Dell is continuing to maintain its compensation accelerator program which is yielding good results. Recently, a little over 200,000 greenfield accounts have been posted on the Partner Portal.

Most channel partners that Techaisle spoke with agreed that Dell has been concentrating on technical training sessions and regularly assessing partners’ performance with a clear objective of empowering them with required product knowledge to be able to pitch to the right set of SMB customers in the best possible way. Unlike the immediate past, account managers from Dell have suddenly become approachable. Some partners went to the extent of telling Techaisle “we specifically like the pre-sales and sales trainings that Dell has designed for Channel Partners. At times I feel that their efforts in the field of training annoy us as there are multiple and repetitive requests for attending or undergoing the same set of trainings that we have already gone through. They do not yet have a system to remove these redundancies”.

Channels are also having good experiences working with Dell’s consultative approach. “Lately, we were dealing with a few SMB customers and they wanted the account managers and few other technical experts to be available on call. We worked together with Dell and closed 3 deals where the consultative partnership worked in our favor”, said an SMB channel partner based in California.

Dell is also investing in supporting the channels when they bid for complex engagements. Their pre-sales support has improved as compared to before as channels now have access to their technical resources who work along with partners’ technical teams in understanding customer requirements, existing customer infrastructure to suggest suitable solutions.

In addition to training and support Dell is making a series of investments to help channel partners by:

Making available 5X demo gear to facilitate proof-of-concept

Increasing number of Solution centers for partners to showcase Dell end-to-end solutions to their customers (granted not many SMB channel partners will take advantage)

Improving areas of financing such as extending credit and payment terms thereby assisting channel partners in better managing their cash flows. The terms announced are 75 days interest-free financing on all Dell purchases for an introductory period of 180 days

Are conflicts a thing of the past? Channels are cautiously optimistic

Dell seems to be diligently working towards building trust within its channel partners. Dell and its partners have had a love-hate relationship due to conflicts with Dell’s strong direct sales force across all divisions. In fact, with the progress made, channels are wishing that Dell limits its investment in its internal sales teams as it would in all probability bring back the channels to “square one”.

The channel partner community reminded us of unpleasant past experiences of “Dell snatching customers from their partners and dealing with them directly”. But they quickly added, “We haven’t come across such a scenario (lately) and would never want to face a situation like that”.

Another partner said, “Dell has always been known for their direct business and has ramped up their efforts in the indirect sales through channels around a year ago. Earlier, we never knew if a deal which is routed through us will be closed keeping us in loop (with our margins intact) or Dell may go ahead and deal with the customer directly. Now, this has completely changed and Dell itself directs the customers to go through us”.

An HP and Dell partner was eager to get his point across regarding lead generation saying that Dell is managing a nice balance while sharing potential customer details with only one partner. HP is not following this approach triggering conflicts.

End-to-End Solutions message is resonating

Dell is steadfastly focused on its end-to-end solutions strategy and channels are paying attention. “Dell offers support in implementing end-to-end solutions. They work with us in consultation to determine the best product and solutions based on SMB customer requirements. Account Manager from Dell works with us closely when we deal with such deployments. We get all the technical help required, if skills are not available with us. Dell offers us access to experts (both on calls and physically, when required) from functional areas when we deal with SMBs for deployment of end-to-end solutions”.

Channels are finding that not only end-to-end solution deals give them extra margins but also makes it easier to deal with Dell, namely, channels get a better attention from Dell. Techaisle feels that if selective attention becomes the norm then many Dell SMB channel partners may flounder.

A mid-west Dell SMB channel partner was very vocal when we spoke with him. “Dell is important while we engage in end-to-end deals with our customers. Dell’s role starts from pre-sales to the deployment of such engagements. They offer the required marketing set-up for the products and solutions. If we have to take care of these things on our own, I think our margins will squeeze and it will be difficult to sustain our business”.

Having a full portfolio of offerings also allows “non-end-to-end solution channel partners” to sell adjacent technologies. For example, “we have clubbed and sold Dell hardware with Cisco, NetApp and IBM storage management and security solutions”.

Then there are other channel partners who try and build solutions with a product from Dell as the center-point. “Based on customer requirements we will see if there is a Dell product suited to meet the needs. If yes, we pitch for it and if there isn’t a product suited, we may bundle it up with other solutions and design an end-to-end solution for our customer. If the customer wants to go with a specific product and Dell doesn’t have promising product in the area; in these cases we will bundle it up with other product and present it as an end-to-end solution to our customers”.

Lingering Channel Challenges

To my question on what should channel partners be expecting next from Dell, Cheryl Cook quickly points out her focus on strategic pillars of mobility, security and Big Data with big push on converged infrastructure and innovative storage solutions. She counters me with a question on VMware EVO:RAIL and its “fantastic” suitability for the SMB market segment.

Channels are listening and echoing that the fastest selling Dell solutions are Rack and Blade servers. But they feel that Dell has not yet been able to position its Force10 and SonicWall offerings effectively and channels are losing to Cisco or HP.

As conflict is disappearing, trust is settling in, channels have a new gripe. When a customer floats an RFP to a number of partners, Dell seizes the responsibility to directly speak with the customer, decides which partner is in the best position to offer most favorable terms and informs other partners to step aside and not waste their time on a deal which may not land with them at all. This annoys the channel partners as they would like a fair opportunity to win the deal and gain a customer by cutting down on own their margins.

No Regrets – but could have been bolder

Looking at the last one year since taking the helm, Cheryl Cook has no visible regrets. After much coaxing and cogitating she says, “Perhaps we could have been bolder in our move” referring to speed of Dell’s organizational moves and intuitive proactive thinking. The future is bright and she and her team are committed to helping all partners – “narrow or broadline”.

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[&] Over the course of last three weeks, Techaisle conducted over 25 depth interviews with SMB channel partners. The discussions clearly revealed that the partners have started to look at Dell rather seriously. – Anurag Agarwal in Techaisle [&]

[&] Over the course of last three weeks, Techaisle conducted over 25 depth interviews with SMB channel partners. The discussions clearly revealed that the partners have started to look at Dell rather seriously. – Anurag Agarwal in Techaisle [&]